Due to historical differences, countries often differ in how quickly a change in

Question

Due to historical differences, countries often differ in how quickly a change in actual inflation is incorporated into a change in expected inflation. In a country such as Japan, which has had very little inflation in recent memory, it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate. In contrast, in a country such as Zimbabwe, which has recently had very high inflation, a change in the actual inflation rate will immediately be reflected in a corresponding change in the expected inflation rate.

Which of the following statements is true in regards to the short-run and long-run Phillips curves in these two types of countries?

a)Japan has a horizontal Phillips curve in the long run.
b)Both countries experience a vertical Phillips curve in both the short and long run.
c)Zimbabwe has a horizontal Phillips curve in the short run.
c)Both countries experience a vertical Phillips curve in the long run.

Explanation / Answer

japan has lonrun vartical philips curve.

Zimbabwe has shortrun vartical philips curve

Ans: b) both countries experience a vartical philips curve in both the short run and long run.

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